Not sure if ECB stimulus is all that important? Ever since ECB head Mario Draghi began hinting about taking action a few months ago, the relative strength of European stocks compared to U.S. stocks surged. This can be seen in the Vanguard Europe (VGK):S&P 500 SPDR Trust (SPY) price ratio.
Even international corporate bonds have been stronger than U.S. corporate bonds. While it is possible that this turn of events may simply be a global search for higher yields, there may be other forces in play; that is, yields may be more likely to decline in an area of the world where the central bank is stimulating its economy as opposed to one where the central bank is paring back (a.k.a. tapering) its stimulus. The SPDR Barclays International Corporate Bond (IBND): iShares Barclays Intermediate Credit Bond (CIU) price ratio demonstrates the trend.
It’s not just Europe either. The Asia-Pacific region (excl Japan) has also been picking up momentum. (See the iShares MSCI Pacific Ex-Japan:S&P 500 SPDR Trust price ratio below). Recent intrigue can be tied to attractive share prices, China financial market reforms as well as speculation that the Chinese economy may have hit its lowest ebb.
Since the 2014 year began, I have owned a number of ETFs for my clients that are benefiting from shifting tides. In many instances, I combined single-country funds like iShares MSCI New Zealand (ENZL) with broad-bsaed international assets like Vanguard FTSE All-World (VEU). The approach has allowed me to overweight high conviction assets while simultaneously maintaining a diversified presence globally.